Rate reductions could hurt Ontario auto: sources

The Office of the Superintendent of Financial Institutions (OSFI) noted in its recently released annual report for 2013-14 that the target in Ontario to reduce auto insurance premiums by 15% could have a negative impact on profitability.

“Domestically, personal auto insurance continued to be the major underwriting challenge. Reforms related to accident benefits improved profitability in Ontario, the largest auto insurance market,” the report stated.

“However, the legislated target of 15% rate reductions in Ontario by August 2015 (with 8% reductions to be realized by August 2014) may negatively impact Ontario personal auto insurance underwriting profitability if the additional claims-related measures introduced in the 2013 Ontario budget are delayed in implementation.”

In related news, an Insurance Bureau of Canada senior source said the Ontario government’s reduction target in auto insurance rates is “absolutely not” doable.

“Absolutely not, and I think the government fully knows that although the government has not come out and said it,” Barbara Sulzenko-Laurie, IBC vice president of policy development, commented during a panel discussion September 23 at the National Insurance Conference of Canada (NICC) when asked whether the reduction is achievable.

“But certainly in our conversations with the superintendent of insurance, he’s indicated to us that no one in FSCO believes that there’s 15% that’s in the system (to be reduced),” she said, referring to the auto insurance regulator, the Financial Services Commission of Ontario.

“When we’re talking to the political side, they don’t admit it, but they sort of smile knowingly in response to the question,” she added.